Have you heard the news that Nike will no longer sell merchandise on the Amazon.com marketplace? It quickly became a major, trending news story—Nike will turn its attention to its direct-to-consumer channel and look to recoup those Amazon sales on its own website.
What’s the deal with that? Depending on who you ask, this is either a smart move for Nike or a bad one. But not everyone is Nike. What does this D2C shift by the athletic apparel company mean for your brand?
First, a Look at the Nike News
It’s never a small change when a brand the size of Nike changes a fundamental aspect of its selling strategy. It was big when Nike first started selling on Amazon, and it’s big when it leaves.
CNBC reported that Nike earned $11.8 billion in the last fiscal year from its direct-to-consumer sales, which was good for 30 percent of its total sales across all channels. However, there’s still a chunk of sales attributed to Amazon.
The eCommerce marketplace remains a premier location for shoppers, as it does incredibly well in driving website traffic and online sales. According to Amazon data, the company’s Prime Day event in 2019 recorded more sales than 2018 Black Friday and Cyber Monday combined, with more than 175 million products sold.
Nike is choosing to forgo this market in favor of other channels. Why? CNBC spoke to industry analysts to find out.
“The move shows us that strong brands realize that traffic driven to their own site (e.g. NIKE.com) is self-sustaining, more profitable, and actually brand-enhancing, while traffic and incremental revenue from Amazon.com is less profitable but also less brand-enhancing,” Jefferies analyst Randy Konik told CNBC.
Overall, Nike’s diverse, multi-channel sales are enough to make it worth the gamble moving on from Amazon, at least for now. It also shows a possible path forward for other brands. Are you interested in selling (or not selling) on Amazon? Here are a few pros and cons, in the wake of the Nike news.
Pros of Selling on Amazon
Baked-In Amazon Audience
For those who sell on Amazon, the marketplace brings with it a large audience of eager online shoppers. This can be great for your brand. You’ll have quick access to millions of potential customers. Plus, you’ll get to piggyback on Amazon’s brand reputation. Shoppers here associate the marketplace with fast delivery, competitive prices, and a large assortment.
Fulfillment By Amazon
You also have the option to use Amazon’s own fulfillment services. This way, Amazon handles the warehousing, shipping, and fulfillment duties for your brand. This can be a big service for any brand that wants to focus on the other tasks behind creating and selling strong products. It’ll give you more time to work on product design, development, and marketing.
Low Barrier to Entry
In addition, the Amazon marketplace is relatively easy for anyone to set up shop and sell. In just a few minutes, you can have your brand on the site. You don’t need a large assortment, either—there are many independent Amazon sellers who are only selling a few products at a time to the marketplaces’ many customers. This makes Amazon a good strategy for many smaller brands.
If you truly want to own your channel, direct-to-consumer selling may be the way to go (like Nike).
Cons of Selling on Amazon
A Lack of Control
On the flip side, some of those pros may be cons depending on your perspective. For starters, plenty of brands prefer to have more control over their distribution channels. Sometimes, Amazon can make it hard for customers to tell who exactly they’re buying from, and Amazon offers few options in the way of product page customization. If you truly want to own your channel, direct-to-consumer selling may be the way to go (like Nike).
Less Brand Growth
As Jefferies’ Konik told CNBC, sales earned via Amazon don’t have the same brand-enhancing power that other channels can provide. From a customer’s point of view, an Amazon sale is an Amazon sale, and many aren’t noticing which true seller was behind that product in the first place. It’s all Amazon. Focusing instead on your own channels opens up more opportunities to build your brand reputation and grow your business.
Selling on Amazon means millions of potential customers. It also means millions of other sellers. This can certainly be a con for many brands, as the increased competition the marketplace brings gets in the way of sales. Furthermore, the actual Amazon.com website makes it really easy for shoppers to compare your brand against other competitors, often in the same view. That wouldn’t be the case if you drove that traffic to your own webstore instead.
Is Your Future on Amazon?
There’s no denying that Amazon is a powerful player in eCommerce. However, as evidenced by Nike, a brand in the right situation may decide that selling on the marketplace is no longer worth the effort.
Depending on the company, the reasons why could include the lack of brand control, limited brand growth potential, and the increased competition. Amazon’s advantages may also be narrowing—the company’s ability to provide free two-day shipping is no longer the best option around, as many other marketplaces and retailers offer a competing option.
So, is your future on Amazon? Or will you be like Nike and go elsewhere?